Due to diminishing DOD budgets, the Government is focusing on cost control in contracts. Since time and materials contracts are becoming increasingly difficult to get approved, the Government has increased the use of cost contracts.
When the Government is putting together Independent Government Cost Estimates (IGCEs) in advance of a Request For Proposal (RFP), there are three critical steps in getting the estimate as close to “should cost” as possible: a Work Breakdown Structure (WBS), a Basis of Estimate (BOE), and the final calculation of the IGCE. Understanding and following the same process will make your cost proposals easier to understand for the evaluation team.
In cost contracting, there are three important steps that Contractors need to address to make sure that the Government can clearly evaluate proposals.
(1) Reviewing the PWS and setting up the WBS: This is the most critical step. The WBS is the heart of a sound technical and cost proposal. Follow through the RFP and PWS to set up the WBS in a manner that is ultimately reflective of the final pricing structure (the PWS and the line item structure). It is important to pay attention to this relationship. The WBS should be detailed to a level low enough for the Contracting Officer to see the steps connected to the technical approach. The WBS will illustrate to an evaluator that the offeror has completely assessed the requirement and identified the critical tasks and skills required for completing the work.
(2) Applying resources and detailing the BOE: The BOE simply allows the offeror to apply the resources required for completing each WBS element. Resources to be addressed include all costs associated with that WBS level, to include: labor, travel, materials, and Other Direct Costs (ODCs). A complete BOE can allow full evaluation of the cost proposal. This leads to a thorough evaluation and less probability for Government questions on the proposal.
(3) Cross-referencing the WBS, BOE and line item structure of the RFP: Once the WBS and the BOE are complete, it is crucial to cross-reference the RFP elements between them to finalize a thorough and concise cost proposal. The relationship between the proposed WBS, BOE and final costs should be easily identified throughout the entire proposal. This step provides several advantages for the Offeror: a more thorough evaluation of the offeror’s proposal, faster evaluation timelines, and well documented award decisions. In addition, making sure that the WBS, BOE and final proposed costs are consistent can benefit after award during the administration phase of the contract. With all costs clearly and concisely identified, interpretation by the Government during administration is less likely to occur.
Companies put a lot of effort into cross-referencing the PWS and the technical sections of the proposal to make sure that all critical areas are covered and are easily readable, but putting the same concentration into a cost proposal can ultimately have the same effect. A technical proposal is only as good as the costs associated with it. Although these steps are critical for cost contracting, developing a system of using this rationale will apply towards any type of Government contract.
This blog post was written by a guest author.